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Mr. John Rhoads, owner of a bicycle shop in Tempe, Arizona, sells 12,000 model XT4 helmets every year. Although he mainly sells these helmets to
Mr. John Rhoads, owner of a bicycle shop in Tempe, Arizona, sells 12,000 model XT4 helmets every year. Although he mainly sells these helmets to college students, the demand for these helmets is constant throughout the year. In an effort to find out what the optimum order size is for these helmets, Mr. Rhoads has gathered the following data. Each hel- met costs Mr. Rhoads $12.00. He sells these helmets to college students for $22.00. Regular customers pay $24.00 for the same helmets. Each helmet weighs 2 pounds. It costs Mr. Rhoads $50.00 to process each purchase order that he submits for helmets. Mr. Rhoads' carrying costs are 10 percent. Mr. Rhoads' bicycle shop is open for business 300 days per year. 11. Find Mr. Rhoads's EOQ for the helmets. 12. Using the EOQ, what is the annual cost for ordering the helmets? 13. Using the EOQ, what is the annual cost for storing the helmets? 14. Given the EOQ calculated in exercise 11, determine the number of orders Mr. Rhoads would place each year for helmets and the time interval between orders. 15. Mr. Rhoads's supplier has agreed to give him a 10 percent discount on orders of 1,000 or more helmets. Should he take advantage of this discount? Why or why not
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